QUESTION 1 A bank makes a 30 year Fully Amortizing FRM for $1,600,000 at an annual interest rate of 5% compounded monthly, with monthly payments. Suppose inflation is 2% per year, compounded monthly. What is the real value of the 120h payment? QUESTION 2 10 pa S Assume the initial rate on a 1/1 ARM is 3.50%. The loan has a margin of +275 basis points above Libor. In one year after the loan is originated, the Libor is 2.00%. What is the fully indexed rate on the loan in one year? 4.75 QUESTION 3 10 points A bank makes a 30 year Fully Amortizing FRM for $2,000,000 at an annual interest rate of 4.75% compounded monthly, with monthly payments. What is the difference between the balance and the market value of the loan after 36 monthly payments if the interest rate rises to 5%? (Give the absolute value of the difference, so the answer should be a positive number)